10-QPeriod: Q1 FY2013

Air Products & Chemicals, Inc. Quarterly Report for Q1 Ended Dec 31, 2012

Filed January 25, 2013For Securities:APD

Summary

Air Products & Chemicals, Inc. (APD) reported a strong first quarter for fiscal year 2013, with sales increasing by 10% year-over-year to $2.56 billion, driven by both organic growth and strategic acquisitions, notably Indura S.A. The company demonstrated improved profitability, with net income attributable to Air Products increasing by 23% to $278.3 million, leading to a diluted earnings per share of $1.31. This performance highlights the company's ability to leverage higher volumes and integrate acquisitions effectively while managing costs. The company also continued its commitment to shareholder returns through a significant share repurchase program, repurchasing $461.6 million in the quarter, indicating confidence in its financial health and future prospects. Operationally, the company saw broad-based strength across its segments, particularly in Tonnage Gases, where volumes increased significantly. Despite some challenges, such as an inventory accounting revaluation impacting margins in the Electronics and Performance Materials segment, overall operating income saw a healthy increase. Air Products is actively managing its financial structure, maintaining a solid liquidity position and demonstrating prudent debt management, further reinforcing its stability and capacity for future growth initiatives. Investors can take comfort in the company's strategic acquisitions, ongoing operational efficiencies, and commitment to shareholder value.

Financial Highlights

54 data points
Beta

Revenue

$2.56B

25.8% Gross Margin

Net Income

$278.30M

10.9% Net Margin

EPS (Diluted)

$1.31

Total Assets

$17.39B

Cash & Equivalents

$545.60M

Free Cash Flow

-$78.60M

Financial Statements
Beta
Revenue$2.56B
Cost of Revenue$1.90B
Gross Profit$662.30M
R&D Expenses$33.30M
SG&A Expenses$268.20M
Operating Income$372.40M
Interest Expense$35.80M
Net Income$278.30M
EPS (Basic)$1.33
EPS (Diluted)$1.31
Shares Outstanding (Basic)210.00M
Shares Outstanding (Diluted)212.60M

Key Highlights

  • 1Sales increased 10% year-over-year to $2.56 billion, driven by a 4% underlying sales increase and 6% from acquisitions.
  • 2Net income attributable to Air Products increased 23% to $278.3 million, resulting in a diluted EPS of $1.31, up from $1.16 in the prior year.
  • 3The company repurchased approximately $461.6 million of its common stock during the quarter under its $1 billion repurchase program.
  • 4Tonnage Gases segment experienced significant volume growth (12%) due to increased spot volumes and new projects.
  • 5Operating margin improved in the Tonnage Gases segment by 160 basis points, driven by higher volumes and lower costs.
  • 6Acquisitions, including Indura S.A. and DA NanoMaterials, contributed 6% to sales growth and impacted operating income and margins.
  • 7The company maintained a strong financial position with a leverage ratio of 48.3% (total debt to total debt + equity) and adequate liquidity.

Frequently Asked Questions

Sales growth was driven by a combination of factors. Underlying business performance contributed 4% growth primarily through increased volumes, particularly in the Tonnage Gases segment. Additionally, strategic acquisitions, notably Indura S.A. and DuPont Air Products NanoMaterials LLC, added approximately 6% to sales, demonstrating successful integration and expansion.

Profitability saw a significant improvement. Net income attributable to Air Products increased by 23% to $278.3 million, and diluted earnings per share rose to $1.31 from $1.16 in the same period last year. This improvement was driven by higher sales volumes, successful acquisition integration, and cost management, although partially offset by factors like inventory revaluation and higher pension costs.

Air Products is actively returning value to shareholders through its share repurchase program. In the first quarter of fiscal year 2013, the company repurchased $461.6 million worth of its outstanding common stock. This is part of a previously authorized $1 billion repurchase program, with $485.3 million remaining authorization as of December 31, 2012.

While the quarter showed strong performance, potential challenges were noted. An inventory accounting revaluation related to lower raw material costs in the Electronics and Performance Materials segment negatively impacted margins. The company also faces ongoing legal proceedings, such as the competition case in Brazil, and environmental remediation liabilities, although management believes these are unlikely to have a material adverse effect on the consolidated financial position. Fluctuations in interest rates and foreign currencies are also noted as potential risks.